Capitalism v. ???

Economics do two things impossibly well:
1. Fuels every good and bad thing that happens politically in the world.
2. Confuses the hell out of me.

It seems to me that money spawns at least as much evil as organized religions and this seems to be more true in the USA (probably because I live here and only found out about "strange lands beyond the borders recently).
My question to all of you is this:
Is there a legitimate better system than capitalism that America could adopt to ease the pressure of this problem?

Replies to This Discussion

Ah yes the trickle down economics. To my knowledge this is the only economic concept that was at all mentioned in highschool. Why do so many conservatives think this is the ultimate idea? Everyone I know who have pushed this on me make less than $50k per year and I fail to see how this benefits anyone more than really wealthy people. It's all based on the idea that they'll take their tax savings and spend it on creating jobs for the rest of us right? What if they decide to be cautious or they just don't feel like starting a new company or expanding one? That is to say, greedy rich people shoot holes in Reaganomics.
Please tell me if I'm wrong- I plan on using this information in conversations with members of my family (it's 1 on 12 atm).

Trickle-down is an especially cruel and condescending notion, essentially a restatement of "let them eat cake". The simple and obvious flaw with it being that the more money you have, the more conservatively you can invest it and still live comfortably on the interest. But the more conservative your investments, the fewer jobs they create, because high-risk and high-yield go together and low-risk means low-innovation and low-economic expansion. In short, wealthy people really are not the engines of job creation because it's not in their best interests to be. The plutocratic wing of the GOP likes to talk about free market job creation, but what they really want is low-tax wealth preservation.

Does it have to be a pure form of any particular system? They all have their failings which should be understood and accounted for. Look at China, a communist country with a strong capitalistic sector. The ways their government has been able to spin on a dime in response to the current economic crisis is admirable. They have responded with efficiencies that are unattainable in a democracy. Yet they would not have been able to lift tens of millions out of poverty without capitalism.

You are correct, capitalism is inherently greedy and must be regulated by the state. Alan Greenspan did not believe that the state should even regulate against fraud!

In any system the struggle is to get the incentive's right. People will do what they are incented to do. If there are incentives for CEO's to take destructive risk for short term gains, they will tend to do that. If there are incentives for people to sit around and and smoke pot all day, you'll get an upsurge in twinkie consumption.

Capitalism works best when dealing with widgets but is not applicable in all situations. Something other than capitalism is required in any situation where maximizing profits is not the only goal. Health Care is a good example of were capitalism fails to deliver all we are asking of it. But that is a topic for another discussion.

@Mike H.
You crushed it buddy. I'm a huge fan for using the style that works (thanks Bruce Lee) and I have found that this invariably involves combining the best features of multiple methods. To put it in my terms, Boxing and Muay Thai are great but can become the perfect striking method if the right elements of each are used wisely- thus becoming a new and better style.
I'm sure that we're far away from this sort of compromise. You can't even say the words communism or socialism in public without having someone throw a rock at you.

I was just informed that a similar discussion is taking place here: http://www.atheistnexus.org/forum/topics/twenty-years-after-the-fal...
There is certainly some merit to your idea Larry, but, pardon me for saying, it seems a little clunky. As a broad generalized sort of way it makes sense but I guess I feel like really rich people could still keep most of their money by shifting it around between realestate, international richy banks, and material goods (art, cars, jewels etc.). Still that's the sort of direction I have been talking about and bravo for thinking outside of the box.

"In any system the struggle is to get the incentive's right. People will do what they are incented to do. If there are incentives for CEO's to take destructive risk for short term gains, they will tend to do that. If there are incentives for people to sit around and and smoke pot all day, you'll get an upsurge in twinkie consumption."

Mike Harvison, are you suggesting that Hostess is behind the medical marijuana trend? That is so beautifully devious I may have to abandon my distaste for conspiracy theories.

The thing to understand is that we have to work around the Capitalism/Communism paradox, that is when a single company has bought everyone else, we arrive at Communism. The fewer companies that own more goods and services, the closer we come to Communism.

Essentially, we have to avoid monopolies.

At the same time we cannot over hinder growth. Until the day comes when sterile labs can be set up in garages, we cannot hope to do medical research the way personal computers sprung up as a literally in house operation. As such we should halt the growth of biotech companies or pharmaceuticals, essentially choosing prosperity over longevity.

In that case, we also have to avoid over regulation.

There is an equilibrium point that exists between the two to prevent the Capitalism/Communism paradox while at the same time ensuring industrial progress.

As for the current economic problems, I don't really understand why people are blaming Capitalism, it's not Capitalism's fault that everything went to shit, it's the marriage of liars and fools that broke the system.

Liars who sell mortgage backed securities and fools who think they're good investments. Liars who say 'the housing bubble will never end' and fools who want to believe them. Liars who give out loans that people cannot possibly afford and fools who take those loans. Liars who say 'it's a good time to buy a home' or 'a home is a great investment' and fools who agreed.

I use the term liars because they were in every sense liars. Estate agents told people to buy overpriced homes that they could not afford, lenders allowed borrowers to take money that would never come back, Mae and Mac repackaged and sold mortgage backed securities that never would have paid off, AIG insured loans that they believed would never default; Ben Stein scoffed at Economists who warned of the Housing Bubble essentially under the argument that the housing bubble would never end --

-- an era of prosperity built around a housing industry that would last forever -- a claim that should have sent the fools into research before listening to Estate agents who get paid regardless of whether or not the house defaults; before taking loans from banks, loans that would then be bought by Mae and Mac from the bank; before buying MBS from Mae and Mac who promised returns; before believing that AIG could possibly have the funds to back the MBS that they insured.

Don't even get me started on the ridiculous AAA, AA, A, B, C, D, F MBS grading system that makes no sense to anyone except the liars who pushed them and the fools who believed them.

As it stands only the only ones who seem to be getting away with this mess are the liars.

If the liars had told the truth or the fools had looked up what they needed, this problem could have been averted.

What's more, what happened in America after AIG, Mae, Mac and the fucking banks totally ruined everything is not Capitalism even by the broadest definition. It is the exact opposite of Capitalism. Giving money not just to a failed company but an entire failed industry is not Capitalism. Anyone who thinks otherwise should buy a dictionary.

Government backed companies is the very definition of Socialism.

The bailout was and continues to be a Capitalist's nightmare.

As for your question, Is there a legitimate better system than capitalism that America could adopt to ease the pressure of this problem?

Firstly, no, because America is not a Capitalist country, no country is, ever has been, or ever will be. Second, a legitimate better system would be one where liars fail and fools suffer consequences to keep them from being either.

Unless I am off in la-la land somewhere, we need a system of capitalism that is DESIGNED to meet our needs. Our present one just sort of "grew" and contains contaminants and remnants of other systems. It has patches all over it as those who profit most from it have tried to keep it working "just one more decade; just until I have a little more", "a little more", "a little more", "a little more!"

I would like to agree with you, but for such a system to work, we would need to predict wants and needs so that at least we know what goals we must meet.

Unfortunately that requires predicting. That requires a guided economy which will break down faster than a relatively unguided economy.

An economy will always lag behind the changing wants and needs because we cannot with a fair degree of certainty know what people will be spending their money on in the future. We don't know what some scientist in a lab is running right now or what some engineer is designing or what some tinkerer in a basement is soldering together. We can barely know what people will want next quarter, much more design a system that will always be ahead of the population.

The reason the system we have survives is because it has worked well enough. Catching up to the wants and needs of the people fast enough to avoid mass unrest.

I will not disagree that something seriously needs to be done about the amount of unmoving accumulated wealth that is stuck in savings accounts and trust funds. Money leaked out of the system like that is bad for the economy. The role of banks was to move money from individual savings back into the economy through loans but we all know how that's been fucked up.

If I was King of America I would levy a 50% flat tax on all individuals with a net income over $1,000,000 but allow all of that to be tax deductible business expenses. They need to start spending their money and put it back into the economy. Where it is now, stuck in banks who aren't lending, isn't doing anyone any good.

Sorry, when I argue economics I often find 'designed' to be a weasel word for 'planned.' It's a reflex at this point.

I agree with you on the issue of inheritance. It is non-meritorious. We need to seriously reconsider how we deal with non-meritorious, unearned amounts of wealth (and conversely debt) that go from one person to another based entirely on whose vagina one fell out of and whose penis had been in that vagina 9 months previous.

I wouldn't go so far as to eliminate inheritance entirely, rather I would compel inheritors to spend a fair portion their unearned money immediately if only to recirculate the currency.

I'll agree that wealth represents work, but people don't aggregate wealth to prove that they're better than others. People aggregate wealth so that they can buy whatever they want whenever they want. There's nothing great about work, work is toil, work is tedious, work is repetitive. No one works to prove that they've worked, they work to earn income to spend on other things. The value of wealth is buying power.

I will take you up on a previous concession that you may be too idealistic. I think you're forgetting that man is greedy. Man is self-interested if not entirely selfish. Cooperation is the exception, not the norm, even then cooperation only occurs when there is a net benefit to each individual in one group over another group in a kind of group-selfishness. Even then, not every individual benefits equally from a cooperative effort.

Everyone wants more for less. Without exception that is the case. That's what drives competition among buyers and sellers that drives a capitalist system. The thing is that no one wants to compete. Buyers want fewer buyers so as to drive down prices, sellers want fewer sellers so as to raise costs. The only way a capitalist system can function is to ensure that no one seller conquers a market and ends competition therein. (There will always be buyers so that's hardly a thing worth regulating.)

No one is forcing anyone to partake in a "money is all" system. People are still free to be poor and homeless if they feel money is too materialistic.

Money may not be all in capitalism, but it is best. Bartering will just create huge inefficiencies when the man with oranges wants apples, but the man with apples only wants pears -- that is unless you have another system of exchange that I haven't heard of yet. In any case the man who does things without consideration of money is often the one for whom money is not a concern.

Louis, I think you have it about right, but I'm not convinced that all those you lump into the "fool" category truly deserved what they got. After all, a bubble does make lots of money for lots of people in the short term. I'm not sure it's so foolish to notice that your neighbors are all making an extra $100K here and there by flipping real estate. Eventually, a bystander begins to understand that if they don't get into the market and start flipping, they are leaving money on the table, which is a powerful incentive to behavior which looks less and less risky as the bubble bubbles on. Of course, it's just the opposite; in a game of musical chairs, the longer it goes, the closer it is to the music stopping. But when you're in it, and scrambling in this hypercompetitive society just to be able to afford a house, and housing prices are spiraling ever out of reach even if your salary is going up at a good clip, and the banks make it easy to overextend your debt, well, it looks pretty compelling.

I get what you mean, but that's why I call them 'fools,' and not just 'idiots,' because they were fooled. They believed something without understanding it fully and dove headfirst into something that even cursory knowledge thereof would have looked like a sham.

Guaranteed returns on investment? Who the hell can legitimately make that claim? That's not investing, that's a money machine, a money machine that does not exist.

Buying a AAA mortgage backed security? The mechanics of such a thing just scream scam.

Even in the grander scheme, the whole notion of flipping homes ad nauseum until everyone is rich is just such a bare faced lie. Where is all that money going to come from? Who is going to live in all these homes?

I'll agree it was compelling and it was convincing, which is why so many people were fooled. But in all honesty estate agents weren't reaching into their pockets and taking their money, banks weren't giving people loans without their knowledge, Mae and Mac weren't emptying bank accounts and filling them with MBS. A liar needs a fool and an individual cannot allow themselves to be fooled, especially when we're dealing with huge sums of money like home-buying money.

I can't sympathize with someone who lost everything because they invested in the estate market.

People who lost their pensions because their pension agency was full of fools who bought MBS, those people have my sympathy for what little it's worth; it's not their fault that their money was beyond their control and handled by fools, idiots, and morons.

A great book that addresses the problems of some economic theories is The Shock Doctrine.

It appears that there are different schools of thought concerning capitalism. Some, like neo-liberalism, believes in a completely open market free from any regulation. This is the theory most often thought of when people think, capitalism.

Others aren't so purely money driven and include caveats for public welfare including social security and medicare.

My thoughts on the matter are that a healthy balance of socialistic and capitalistic policies will allow not only for people to live their lives, but also allow for greed to thrive amongst those that wish to play the stock/derivatives/funds/bonds/etc. games. I see capitalism as a man-eats-man game that I'm not entirely willing to be a part of.